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[Benjamin Shepherd]

Germany is the 2nd largest exporter of goods, came out of the recession quickly, and is slowly becoming the definitive European country in terms of economic power.

They did this by having companies boost employee wages, promise no cuts to the workforce until 2015, and support union efforts to help with benefits. The productivity was extremely high afterwards.


It cannot be assumed that a competitive society involves an extremely laissez-faire free market, without regulation or fair practices and standards of any sort. And by that, I mean government, not private standards.

[Vikarion]

Germany is the 2nd largest exporter of goods, came out of the recession quickly, and is slowly becoming the definitive European country in terms of economic power.

They did this by having companies boost employee wages, promise no cuts to the workforce until 2015, and support union efforts to help with benefits. The productivity was extremely high afterwards.


It cannot be assumed that a competitive society involves an extremely laissez-faire free market, without regulation or fair practices and standards of any sort. And by that, I mean government, not private standards.

You misrepresent what Germany did, exactly. What Germany did was work with businesses to allow them to cut back worker hours without out-and-out firings. They also have the benefit of having an aging workforce to keep unemployment low.

http://www.weeklystandard.com/blogs/why-germanys-unemployment-rate-lower


But even more interesting is what you fail to disclose: that Germany approved deep and drastic cuts in government spending.

http://www.independent.ie/business/european/german-cabinet-approves-euro816bn-spending-cutbacks-2250382.html

What Germany did is the exact opposite of what Keynesian economics recommends - reducing spending and cutting welfare. That they worked out employment programs is irrelevant to this larger fact. So are unions, since unions exist mostly (only?) within free markets as opposed to socialist ones. I have no quibble with unions so long as membership is voluntary.

And of course there is a place for regulation. But governments have no incentive to make regulation feasible for a business to follow, or to ensure that businesses can follow regulations and still remain profitable. Indeed, since many bureaucracies are funded by fines for violations, governments have an incentive to ensure that regulations are impossible to follow. Many regulations, in fact, are. For example, in California, a painting company finishing a normal one-story home might charge $6000. However, if that house was constructed prior to 1979, the regulations it will be required to follow in regards to lead paint might well raise that price to $20,000 or even up to $40,000, depending on the conditions. What will happen? The homeowner will either hire someone without a license to do the work, or will do the work themselves. This is merely one example - I could give you many more. The EPA has no incentive to make the regulations feasible to follow, only an incentive to ensure that they can't be sued.

My boss went to the class, looked at the regulations, and upon consultation with his foreman (me), we decided never to paint another house that could possibly have lead paint in it again. We know how to deal with lead paint, and we know the common sense procedures for working on older houses, but we will not risk our livelihoods and lose money by doing the work. I imagine that most other contractors will feel the same. The end result is that more people are going to be poisoned by lead paint because they don't know how to remove it or paint over it safely.

What worries me these days is that when I point out situations like this to many people, especially the young, there is no recognition of there being any problem or fault with the regulation or the government. Instead, the anger is often directed at me or whoever is affected by the regulation, in that we don't just shoulder the burden ourselves, as if we have some duty to go bankrupt in service of and to our fellow man. There is no recognition that we live in a world where businesses and employers have finite wealth and time, that we don't exist solely to employ and provide for others.

I look askance at "regulation" because it almost invariably means destruction of my ability to create wealth - stealing my time and energy to comply with rules that often counter in effect their specified purposes. I look askance at "fair practices" because it usually means laws favoring specific groups or individuals, almost always at my expense. I despise the imposition of government "standards", because they are the standards of the most useless people in society, those who create nothing: the politicians and bureaucrats. All I want is a clear field where I can buy and sell freely, and where agreements are enforced. I make no special pleading, and I despise those who do.

[Lyn Farel]

People being in debt is the unfortunate result of certain economists falling to the Keynesian theory that consumption is what drives an economy. Thus, governments have sought to emphasize consumption over saving or investing. Combine this with the quite natural desire of companies to sell their products, and we have a society that does not view debt as a bad thing.

Unfortunately, the Keynesian economic models have not proved more successful at preventing boom and bust cycles than the Neo-Classical economic models did, and, in fact, are often held responsible for the stagflation of the seventies, amongst other ills. Keynesian economics predicted that stagflation was impossible, and we probably should have abandoned that model right there. Instead we rehabilitated it.

And, let's be honest - being in debt isn't always bad. The question is whether what you went into debt for will provide you with value over whatever else you could have used the capital and interest for. It's hard to work without a car where I live, so I bought a car. It's more than repaid my investment, because I make more than the car costs with the job I have.

Houses, on the other hand, aren't the greatest investment. A house contributes nothing to your income. Now, its value may go up, but that's speculation, and should be considered to be such, not the surefire investment it was portrayed as. Certainly you need a place to live, but one should consider all the options.

These are merely a couple of examples. But my point is that people being in debt is a cultural phenomenon more than an economic necessity. We have had periods of spectacular economic growth when people were behaving like misers, and we have had busts when people were spending like mad (the latest recession comes to mind). Indeed, it's better for an economy for the average person to have some savings, because they provide a cushion for economic hard times.

The fallacy that minimum wage is necessary to keep economic prisons from forming is demonstrated by the fact that people who contract their services - i.e., many construction workers, some consultants and IT professionals, etc. - are not protected by minimum wage, but can still make a decent living. The reality is that a minimum wage may protect a very few, but for the most part serves more as a barrier to employers hiring those less qualified at all.

It is education and diligence that most protect against poverty. And, in regards to these matters, our government and culture has badly failed. We have a culture of entitlement and willful ignorance, especially in regards to economic education.

Hard to tell that to people earning roughly say 1000$ per month, then having to pay half of it for their house, another quarter for taxes, and the little bits that are still there for food and supplies. And I am speaking of people earning the minimum salary.

Those are not the products of Keynesianism and consumerism. Some are getting in debt because they are caught by the "consume moar" capitalist doctrine, but some are crippled by debts because they do not have any other choice (which adds even more things to pay each month).

Remember the subprime lendings that fucked up a part of the international economy : typically that kind of crap that can happen when you have not enough regulations.

[orange]

Those are not the products of Keynesianism and consumerism. Some are getting in debt because they are caught by the "consume moar" capitalist doctrine, but some are crippled by debts because they do not have any other choice (which adds even more things to pay each month).

Remember the subprime lendings that fucked up a part of the international economy : typically that kind of crap that can happen when you have not enough regulations.

"Consume moar" is not a capitalist doctrine.  Consumerism and capitalism are not co-dependent and consumerism can be bad for capitalism.  Consumerism pushes product quality down (it will be thrown away anyway); capitalism works fine in a conservationist culture where people save and focus on purchasing quality (over quantity) goods.  The spiral goes both ways and is driven by the habits of those taking part in the economy.  Consumerism is easy and requires little thought on the parts of the participates, while conservation requires participates to think through the choices they make and make sound purchasing decisions.

Also, people forget that the sub-prime lending in the US was encouraged by the government in the political pursuit of increased home ownership.  A business bank does not want to loan money to those it does not think will be able to pay back the loans, that is bad business.  Markets do regulate themselves contrary to what many think.  Government involvement leads to things like leaving perfectly arable land fallow and banks having to provide unaffordable loans to people living outside their means.

[Vikarion]

Hard to tell that to people earning roughly say 1000$ per month, then having to pay half of it for their house, another quarter for taxes, and the little bits that are still there for food and supplies. And I am speaking of people earning the minimum salary.

A far better method of helping these people is through positive action, such as a negative income tax, rather than through the negative action of setting an arbitrary standard at which people must be paid. It's all very well and good to say that everyone deserves a "living wage", but what if what a person does just isn't worth $7.25 an hour? The law requires then that either the employer hire the employee at a loss (not going to happen), or that the employer simply not hire the employee at all (happens quite a bit). Furthermore, since prices (according to a study in the U.K.) rise faster in areas with a minimum wage, one must question exactly what good it does to have more money if everything costs more as well.

What the poor need is money, but instead of giving them money and letting them decide how to spend it, we have instituted programs with vast administration costs and sketchy effectiveness. A negative income tax or other straight payment to those who work would be far simpler to plan and execute, as well as far more effective in alleviating poverty, rather than simply making it bearable. But I do not think that those who administer welfare programs are interested in alleviating poverty - if they did alleviate it, they would be out of a job.

Those are not the products of Keynesianism and consumerism. Some are getting in debt because they are caught by the "consume moar" capitalist doctrine, but some are crippled by debts because they do not have any other choice (which adds even more things to pay each month).

I've seen very few people crippled by debts they didn't choose to have. There are some, certainly, but are we to make the purpose of society insuring the unlucky? Most people who I've seen living in poverty made choices to spend money or assume responsibilities (children, pets, a house, etc.) that they had no reasonable business assuming. If you choose, for example, to have kids when you do not have the means to support them, why should someone else be penalized for your actions? And if we are looking to the benefit of the children in such cases, very well, but let us remove them from their parents who cannot support them.

Remember the subprime lendings that fucked up a part of the international economy : typically that kind of crap that can happen when you have not enough regulations.

Whether or not that kind of crap can happen when you do not have regulation is irrelevant to the last crisis. The last crisis has plenty of villains in both government and the private sector, but it's a matter of documented fact that many in the regulatory agencies simply chose not to apply regulations that would have prevented many of the excesses.

I would have to argue, however, that the greatest fault lies in the private rating agencies such as Moodys, who told the investment houses and banks that the CDOs, synthetic and otherwise, were sound. Here are some articles detailing some of the fallout:
http://www.globalresearch.ca/index.php?context=va&aid=12731
http://www.cbsnews.com/stories/2010/06/02/business/main6540637.shtml
http://www.bloomberg.com/news/2011-01-26/moody-s-assumed-4-annual-rise-in-home-prices-in-model-for-credit-ratings.html

But who made the rating agencies the arbiters of what was sound and what was not? Ah, yes, our government: http://voices.washingtonpost.com/ezra-klein/2009/09/how_the_government_helped_mood.html

Of course, as Orange notes, you also had massive government encouragements and incentives to buy bad loans. I can go into deeper detail on that at some other time. For now, I have to get to work...but one last thing...

I love business, but not businesses who cheat their customers, who engage in corruption, or who work with the government to establish effective monopolies - which is how almost all monopolies are established. It may be true that there are areas where there is not enough regulation, but it's rarely that simple. In almost all cases, there is either too much regulation, and/or regulations are badly and incompetently designed. In the worst cases, of which there are distressingly many, regulations are designed to be impossible to follow, so that everyone engaged in a certain field of endeavor will be constantly under the power of the regulating agency.

[Benjamin Shepherd]

You type a lot Vikarion.

[Lyn Farel]

I basically agree with you Vikarion on the fact that income taxings are much better than arbitrary standards, though minimum arbitrary standards such as minimum wages are needed to be sure people are not exploited. On any basis though, income taxes are another form a state regulation.

I do not know well enough the american system so I won't be able to speak very well about the precise effects of the US administration concerning employment. Its works in France, even if it is not perfect, so I am probably more inclined to think without minimum wages people would just get exploited, because until we get in a reverse situation where workers are in shortage, now we still have often too few jobs. That way companies dictate the terms, and not employees. We see that everyday with people being employed illegaly (mostly immigrants) for a misery. They have no choice indeed : better to be paid almost nothing than nothing. But those illegal jobs indicate quite clearly to me that employers will mostly always do what they can to stay competitive with lower costs, especially if they are NoH like.

I've seen very few people crippled by debts they didn't choose to have. There are some, certainly, but are we to make the purpose of society insuring the unlucky? Most people who I've seen living in poverty made choices to spend money or assume responsibilities (children, pets, a house, etc.) that they had no reasonable business assuming. If you choose, for example, to have kids when you do not have the means to support them, why should someone else be penalized for your actions? And if we are looking to the benefit of the children in such cases, very well, but let us remove them from their parents who cannot support them.

Heh, always the problem between helping the helpless while opening a way for the rest to exploit the system, or let the helpless starve to avoid such exploits.

Honestly the example I took where people have to loan to survive is real (but marginal as you said), but the main problem is that most of the people that barely survive do not loan. And sometimes it is not for choices like children, dogs, investments, etc. That can be divorced women (pretty frequent), that do what they can to survive with their children. Ah yes, you might argue that they chosed to have children and marry with someone that let them down eventually, and that people should not be asked to pay for their "mistake". Well, I call that solidarity. That can also be retired people that are not earning enough money from the government to survive (not sure how it is in other countries, but it is starting to get really worrying here). We might argue they have chosen a job that was not paying them well and did not saved enough to live the end of their life. Easy to say.

I love business, but not businesses who cheat their customers, who engage in corruption, or who work with the government to establish effective monopolies - which is how almost all monopolies are established. It may be true that there are areas where there is not enough regulation, but it's rarely that simple. In almost all cases, there is either too much regulation, and/or regulations are badly and incompetently designed. In the worst cases, of which there are distressingly many, regulations are designed to be impossible to follow, so that everyone engaged in a certain field of endeavor will be constantly under the power of the regulating agency.

I mostly agree I suppose.

"Consume moar" is not a capitalist doctrine.  Consumerism and capitalism are not co-dependent and consumerism can be bad for capitalism.  Consumerism pushes product quality down (it will be thrown away anyway); capitalism works fine in a conservationist culture where people save and focus on purchasing quality (over quantity) goods.  The spiral goes both ways and is driven by the habits of those taking part in the economy.  Consumerism is easy and requires little thought on the parts of the participates, while conservation requires participates to think through the choices they make and make sound purchasing decisions.

Also, people forget that the sub-prime lending in the US was encouraged by the government in the political pursuit of increased home ownership.  A business bank does not want to loan money to those it does not think will be able to pay back the loans, that is bad business.  Markets do regulate themselves contrary to what many think.  Government involvement leads to things like leaving perfectly arable land fallow and banks having to provide unaffordable loans to people living outside their means.

I agree on the fact consumerism is not a capitalist doctrine, but it comes from it, wanted or unwanted, that is what I meant.

Concerning banks and loans, yes, indeed, bad business to loan to people unable to pay back. Still, they do it quite often for the only reason that bank employees often overstep their bonds just to make more contracts (this is one of many causes), and overdebts have been increasing at an alarmist rate in some countries. This is still not a whole plague, but it is here.